Effects of Environmental Regulation on Economic Activity and Pollution in Commercial Agriculture

Research on environmental regulation’s effects on economic activity has largely focused on manufacturing, ignoring one of the major polluters in the U.S. – commercial agriculture. As livestock production has become increasingly mobile, regulation has become an important criterion in firm location. This article extends the literature on environmental regulation’s economic effects to commercial agriculture by exploiting a series of regulations adopted in North Carolina in the 1990s. During this time, the state’s hog production more than tripled as a consequence of welcoming state legislation. This sudden growth creates an opportunity to study how environmental regulation affects the location of economic activity, the externality costs of legislation aimed at economic growth, and the effects of swine on air pollution. The last of these foci is of particular importance to upcoming federal regulation of large-scale livestock production under the Clean Air Act. By exploiting the distinct trend breaks in hog production in North Carolina, I am able to non-parametrically control for trends in the rest of the country as well as trends in North Carolina prior to the enactment of the lax regulations. I find that the laws led to an additional 11% increase per year in hog production in North Carolina relative to the rest of the U.S., as well as a 10% increase per county per year in ambient air pollution. Through a series of falsification tests and examinations of alternative hypotheses, I conclude that the air pollution is attributable to the hogs; a doubling of production yields a 92% increase in ambient air pollution. The magnitude of the changes in air pollution is large enough to result in significant public health effects, totaling in cost to at least 20% of North Carolina’s hog production revenue.